November 21, 2017

Tether claims its treasury got hacked, 30 million+ in USDT gone

Business

November 21, 2017

Tether is the issuer of the USDT managed asset. This asset is said to be pegged and backed by real USD, but is not redeemable for USD. Most of the big exchanges out there support USDT, and in recent months, Tether has enjoyed enormous volumes on trading. Given that many exchanges, such as Poloniex, don’t support Fiat to Crypto trading, USDT seemed like the natural choice for most traders looking to play the market, without ever needing to go back and forth to the bank.

Over the last month, Tether has come under a lot of heat from various entities. Calls for more transparency have been brewing. The timing of this latest hack couldn’t have been worse.

A critical announcement published by Tether states that “$30,950,010 USDT was removed from the Tether Treasury wallet on November 19, 2017 and sent to an unauthorized bitcoin address.”.

Meanwhile the tether.to backend wallet has been suspended, and a hard-fork has been prepared for the eco-system to adopt as quickly as possible to prevent the movement of coins from the address holding the Tether.

The question remains, who owns the address: 16tg2RJuEPtZooy18Wxn2me2RhUdC94N7r and what was the purpose of the attack.

At the time of writing we can see that the funds have not moved onwards, but this doesn’t mean that the funds haven’t been deployed off-chain. If the address belongs to an exchange, then the flow-on effect could be devastating. Potentially this can mean that the USDT has been distributed, traded, and so on.

The crypto-market across the board has reacted with a small, but notable dip in prices.

It raises another question, just how depended, and ingrained has the Tether system become in the crypto world, and what does this mean to the eco-system. Unlike the majority of crypto-currencies which are mined and decentralized, Tethers are centrally governed and issued. In a sense, it makes the resolution of such a hack much easier, as there is one decision making body, but on the other hand, it essentially brings the fiat system back to the fore.

USDTs can be printed on command, and although Tether claims that this is indeed backed by tangible USD, a growing group of sceptics remain, and the latest development are not going to help whatsoever.

Tethers seem to work well particularly with rising price of Bitcoin… as the need arises, more and more tethers are issued and generated to meet demand. But what happens when Bitcoin falls? Or what happens when a large number of users choose to exit tether coins?

The dependence that the eco-system (exchanges, users, wallets), have placed onto Tether does seem at a little concerning. Particularly when the point of crypto was to free users of the central governance of the fiat system.